D.C. overpays landlords millions to house the city’s poorest

The D.C. Housing Authority pays $2,467 in monthly rent for Simpson to live there, but his apartment at the Havana was never worth that, even when new. One real estate consulting firm recently put the median market rent for one-bedrooms in the area at $1,613.

DCHA agreed to the amount anyway, because it doesn’t check to ensure rents it pays on behalf of low-income voucher holders are in line with market prices, as required by local and federal regulations. As a result, the agency overpays landlords by millions of dollars every year, a Washington Post investigation found.

Paying above-market rates means fewer people are helped by the troubled housing authority, which is charged with administering more than 15,000 vouchers held by low-income households across the District, while a waiting list runs more than 30,000 people long.

The overpayments also provide incentive for landlords to turn buildings like the Havana into, in essence, privately-run public housing complexes, where residents frequently don’t receive the social services they need.

And tenant associations say the infusion of inflated rents puts upward pressure on the market, which makes housing less affordable for people who don’t hold vouchers, potentially exacerbating D.C.’s long-running affordable housing crisis.

Brenda Donald, who has been director of the authority for 20 months, dismissed an internal memo by her predecessor warning about the issue, told tenant associations it wasn’t a problem, sparred with a DCHA board member who urged her to address it and sided with landlords and developers, who were pushing to prevent lower payments, The Post found.

But in an interview for this article, Donald acknowledged that the agency’s failure to properly assess rents has led to overpayments. She said her stance changed recently after talking with U.S. Department of Housing and Urban Development officials who issued a sweeping report in September, which flagged the problem alongside the agency’s failure to provide “decent, safe, and sanitary” housing for its residents. The report depicts a housing authority in disarray and at risk of defaulting on its agreement with the federal government.

“We are going to fix all of this,” Donald said.

Squatters, meanwhile, live in the Havana’s vacant units, which have multiplied as voucher holders flee the dismal conditions — uprooting their lives once again.

“It’s out of hand,” said Simpson, among the few tenants left in the building, as its owner tries to avoid foreclosure. “Somebody’s going to have to step in and do something.”

‘Where the deals are’

About a mile east of the Havana is another apartment building called the Jacob. It sits along Benning Road, next to a liquor store and across the street from a public housing complex. The Jacob, like the Havana, advertises one-bedroom apartments for $2,467 per month. No market renter would likely pay that. A nearby building offers one-bedrooms for less than $1,900.

But DCHA pays the Jacob’s asking price. With the exception of a few units attached to another affordable housing program, the Jacob is full of voucher holders.

DCHA has a set of price caps according to neighborhood and bedroom quantity. In practice, if a landlord asks for the cap, that’s what DCHA pays — regardless of market price, The Post found, and Donald acknowledged in her interview.

The agency pays these caps for a quarter of its voucher contracts, The Post found in an analysis of voucher data provided by DCHA in response to a Freedom of Information Act request. In many cases, DCHA pays the caps regardless of whether tenants in the same building who don’t have vouchers pay far less. Those receiving the payments are spread across the city and range from landlords with duplexes to those of high-rise apartment complexes.

The goal of the voucher program is to help tenants, who typically pay about 30% of their income toward rent, enter the private market. But by failing to assess how much units are worth, DCHA has created a market of its own — on which developers and landlords have capitalized.

Gary Bechtel, chief executive of the Michigan-based investment firm Red Oak Capital Holdings, said it has financed about a half-dozen redevelopment projects based on DCHA’s rent caps — “because that seems to be where the deals are.”

Because DCHA bases the caps on bedroom quantity, some developers gut old multifamily buildings and reconfigure the units to have more bedrooms in the same square footage, Bechtel said.

When a building is done, Bechtel said, the developers will let the city know, and case workers assisting new voucher holders come calling. “They’re full within a week or two,” he said. “I mean, it’s crazy.”

Along with paying more for apartments than they are worth — as is the case at the Havana and the Jacob — DCHA often pays for higher-cost units than the median in a given neighborhood.

The agency pays $2,648, including utilities, for one-bedrooms at Longfellow Apartments, along Colorado Avenue in 16th Street Heights. That’s more than $1,000 above the ZIP code’s median market rent for one-bedrooms, as estimated by HUD. It is also above the building’s current advertised one-bedroom price of $2,250.

Both types of overpayment are contrary to federal rules intended to ensure as many people as possible can be helped. HUD requires housing authorities to set payment limits that steer voucher holders to moderately-priced units so the government doesn’t pay for more amenities than families need. And regulations require housing authorities to ensure rents paid on behalf of voucher holders are reasonable compared with market rates. HUD also requires landlords to certify voucher rents are not more than non-subsidized units on their premises.

Peter Bonnell and Steve Schwat, principals at UIP Companies, a real estate investment firm that manages Longfellow Apartments, did not return phone calls and messages requesting comment.

In recent years, the District has expanded its voucher program to house more chronically homeless people, who frequently suffer mental health or addiction problems. Case workers are supposed to facilitate care and services. But “that ain’t working,” then-D.C. Deputy Mayor for Public Safety and Justice Chris Geldart acknowledged at an advisory neighborhood commission meeting last year.

Geldart said the problem begins with “what are we paying in our vouchers” and whether it includes security in the buildings “as well as the treatment that needs to be done for those folks.”

At the same time, according to HUD’s recent review, DCHA is failing to conduct routine inspections on the units.

Landlords and tenants don’t always know what they’re getting into.

“You do an interview, and someone’s on their best behavior, but then they get into your property, and they’re just, like, destroying the property,” said Philip Simon, co-founder of S2 Development, which built the Jacob. “You’re just constantly repairing stuff that you already repaired and shouldn’t be your responsibility.”

The building has rapidly deteriorated, and police are called there frequently. “It’s nuts here,” said Charlette Smith, a voucher holder who lives in the Jacob with her two sons, ages 5 and 7. She said there’s no security, and she fears both other tenants and those they allow in, some of whom sleep in the stairwells.

“It’s not a safe place to raise children,” Smith said. “At first it was, until they started moving all kinds of crazy people in here.”

Millions in overpayments

DCHA’s trouble with the federal rules designed to prevent overpayment dates back to 2009, when the agency — to cut costs — stopped checking for overpayment on individual apartments, records show. Instead, it began checking rents against neighborhood market medians.

Then, in 2014, DCHA began raising the citywide payment limits, in an effort to deconcentrate poverty and allow voucher recipients access to “high-opportunity” neighborhoods with better schools and less crime. The move was rooted in best practices, and it accomplished its purpose, as voucher holders gained access to larger swaths of the city.

As DCHA raised the citywide payment limits, the neighborhood rent caps came up too — but with little regard for actual market rents. DCHA gave 35 of the 57 neighborhoods the same caps. In 2019, DCHA stopped updating them altogether. Meanwhile, building owners learned money could be made by exploiting differences between market rents and what DCHA would pay.

In response to a Freedom of Information Act request, DCHA provided The Post data on 16,506 voucher contracts, which, in addition to “tenant-based” vouchers, included some of the agency’s more than 3,000 “project-based” vouchers tied to specific developments, DCHA officials said. To understand how much money DCHA may lose to paying rents that are above market medians, The Post analyzed data on more than 4,000 leases for which DCHA pays above the estimated median market rent for that unit’s bedroom quantity in that neighborhood. The Post found that DCHA spends more than $1 million dollars a month for these units over the estimated neighborhood market medians.

The Post used neighborhood market median estimates created by Novogradac & Co., a national accounting firm specializing in real estate and housing issues that DCHA hired last year. Though DCHA officials say they believe the estimates to be accurate, others have criticized them as too high in some neighborhoods or too low in others.

HUD, in its September report, instructed DCHA to ensure the agency is not paying above-market rates for its federally funded voucher leases, identify such overpayments going back to 2020, and submit a plan to reimburse the federal government.

About a third of D.C.'s tenant-held vouchers are locally funded, but D.C. regulations say those, too, must follow HUD’s rules.

“Each unit needs to be reviewed on its own merits to make sure the asking rent is appropriate when looking at comparable units,” Brendan Goodwin, a HUD housing program specialist, said in August during a webinar for housing officials.

One risk of approving rents that are too high, Goodwin said, “is that you could potentially alter certain private submarkets over time with inflated rents, and that could have a really harmful impact on families in your communities that don’t have vouchers.”

Longtime residents of buildings along Connecticut Avenue in Northwest D.C. say this is happening there. “The very high subsidies incentivize landlords to lease more and more apartments to voucher holders because they can charge so much more than individuals without vouchers can afford,” said a letter to D.C. Mayor Muriel E. Bowser (D) last year from the leaders of five tenant associations.

Donald emailed the letter’s author, Harry Gural, in August and accused him of voicing a “false narrative.”

DCHA pays $2,648 including utilities for one-bedrooms at 4801 Connecticut Ave. on behalf of nearly two dozen voucher holders, records obtained by The Post show, though the building has recently advertised one-bedrooms including utilities for $1,700. Older buildings such as this one are subject to D.C. rent-stabilization law, which can affect prices for new renters. But such restrictions do not apply to subsidized renters, giving landlords incentive to lease to them.

Alvin L. Aubinoe III, who owns the company that manages the building, did not return phone calls requesting comment.

Agency leadership divided

By 2020, then-DCHA board member Bill Slover noticed the agency’s rising voucher costs. Slover, a development consultant whose second stint on the board began in 2015, was DCHA’s longest-serving commissioner. He attended its online meetings from his basement home office.

The majority of board members and its chair are appointed by the mayor. But Slover was appointed by the D.C. Consortium of Legal Services Providers, which represents low-income Washingtonians.

Slover and Bowser frequently found themselves at odds. The mayor took aim at him, though not by name, at an October news conference, saying some board members were “accountable to no one.” Before HUD’s review of the agency, Slover had beseeched federal officials to step in.

As Slover became concerned about voucher costs, he pressed then-agency director Tyrone Garrett to look into it. They realized that DCHA was approving rents without checking market rates.

“The natural impact,” Garrett wrote in an April 2021 memo, was that DCHA paid rents “above the amount charged other tenants for similar units.” The memo said that the average cost per voucher increased from $1,190 to $1,550 from 2016 to 2020.

The memo, in which Garrett pledged to fix the problem, was addressed to then-board chairman Neil Albert.

The next month, Albert led the board to remove Garrett, who had a rocky three-and-a-half-year stint at the agency.

After Donald took over from Garrett in 2021, it appeared she might follow up on his concern, though she said a planned system to check individual leases against market values wasn’t working. She told the board in May that “as a result of the increased or the inflated rents … there are a lot of what I’m calling de facto public housing buildings in the city that are creating a lot of other dynamics.”

Donald recommended lowering the agency’s payment limits. During the summer, she shopped the plan to residents, landlords, developers and lenders.

By August, Donald had reversed course. She told the board data errors had led her to a misconception that the agency was overpaying, and she recommended against lowering the citywide payment limits.

Slover was incredulous, and at board meetings in September, he grilled Donald and other DCHA staffers on the issue. Donald and the mayor’s chief of staff, then-board member John Falcicchio, argued with him.

Landlords who Slover spoke with set prices according to DCHA’s neighborhood payment caps, and the agency paid what they asked, Slover told Donald. “I said, ‘Well, how do you negotiate your rents?’ And they said, ‘What do you mean? There’s no negotiation.’”

Donald told Slover he was wrong, and when he brought up Garrett’s memo, she said it “was not based on real analysis.”

“I don’t know what the previous administration based its 2021 memo on …” she said.

The debate culminated on Sept. 14, as the board was about to vote on Donald’s recommendation to raise the agency’s citywide payment limits. Slover again pressed Donald about the failure to check lease payments against the market. This time, then-board chair Dionne Bussey-Reeder, whom Bowser had appointed to replace Albert, shut Slover down. She instructed Donald not to answer any more of his questions.

Two weeks later, HUD issued its report, which squarely backed Slover’s assessments. The report gave DCHA until the end of March to correct issues or risk escalation from federal officials. Bowser reacted to HUD’s report by pushing legislation through the D.C. Council that replaced DCHA’s board with a slightly smaller reform board, one that she said could “focus on its mission, not its differences.” The board would still be controlled by the mayor, and several members kept their seats. Slover’s was eliminated.

Ben Soto, a developer who is also on the board of directors of EagleBank, said Bowser’s move was a win for the business community.

“I can tell you the lending community and landlord community were very happy about that decision …” said Soto, a former campaign treasurer for Bowser. A board with fewer members, he said, “that most likely would be more pro-business and conservative will make the board less dysfunctional.”

Donald’s short-lived recommendation in May to reduce DCHA’s rent limits, Soto said, had temporarily put some development deals on ice.

Banks “decided not to lend to multifamily assets that had voucher tenants until the Housing Authority had made a decision,” Soto said. “You had tons of loans that weren’t able to close from that.”

The flip side of the problem

After HUD’s report, Donald continued to push back. In a November response to the federal agency, she disagreed with its finding, citing reports DCHA sent HUD over the years that included segments explaining it had stopped checking individual leases against the market. HUD’s approval of the reports, the response suggested, amounted to authorization of DCHA’s approach.

HUD officials say DCHA is following neither federal regulations, nor its own modified policy to set reasonable rents. DCHA cannot “simply allow landlords to request the rent be set at the top” of its payment caps, HUD spokesperson Shantae Goodloe said in an email.

In an interview, Donald said that after meeting with HUD officials recently, she has agreed to correct the issue. Bowser’s office, in a statement sent by spokeswoman Susana Castillo, said the mayor expects that the agency’s “continued analysis will yield enhanced compliance ensuring the most efficient use of resources.”

Donald pointed to a flip side of DCHA’s haphazard neighborhood rent limits. While they are too high in some affluent neighborhoods, they are too low in some poorer neighborhoods. She asserted that while the too-high limits cost money, the too-low limits balance them, at least in a budgetary sense.

But low limits don’t save money in the same way high limits cost money. Because while DCHA doesn’t check to see if rent transactions are worth it, landlords do.

Nisa Harper, 48, lives in Anacostia with her four children. One son goes to Anacostia High School, another goes to Ketchum Elementary, right around the corner from the apartment a nonprofit has been renting for them.

After being approved for a voucher recently, Harper wanted to stay in Anacostia. But she soon realized DCHA’s payment limit for a four-bedroom in Anacostia is $2,324. That’s $1,000 less than the median market rent for a four-bedroom there, according to Novogradac.

“When I have looked at places in Southeast, they usually don’t fit the rental range,” Harper said. “So if I’m looking for a place in Southeast, I’ll look for a three-bedroom in the basement.”

The low rent limit in Anacostia has led Harper to search in other neighborhoods, where DCHA’s limit for a four-bedroom is as high as $4,753. So DCHA may end up paying much more for Harper than if the agency would pay the market median in Anacostia.

Many of those like Harper, meanwhile, end up in places specifically geared to voucher holders — places like the Havana.

The building was finished in 2018 by developer Habte Sequar, who originally planned condos there but shifted his strategy to voucher holders. In an interview, Sequar blamed the building’s state of disrepair on its tenants.

“You had a couple of bad elements that we have no control over at all,” Sequar said. “And that comes with these programs.”

The trash bins outside often overflow, and a few dozen shopping carts rust nearby, left by tenants or squatters who stole them. Residents have complained of “urination, defecation, sex, and drugs” on the unoccupied fifth floor, according to a letter that advisory neighborhood commissioner Amber Gove sent to the mayor a year ago.

From what she’d heard from tenants, Gove wrote, “no one would pay their own money to live there.”

Story editing by Katy Burnell Evans. Photo editing by Mark Miller. Copy editing by Jeremy Hester. Design by J.C. Reed.